United States General Accounting Office
GAO
Report to Congressional Requesters
September 1997
SPACE STATION
Cost Control Problems
Are Worsening
GAO/NSIAD-97-213
GAO
United States
General Accounting Office
Washington, D.C. 20548
National Security and
International Affairs Division
B-276834
September 16, 1997
The Honorable Dale Bumpers
United States Senate
The Honorable John Dingell
House of Representatives
As you requested, we have updated certain aspects of our July 1996 report
on the International Space Station (ISS), which is being developed by the
United States and others.1 Specifically, this report addresses the Russians’
performance problems and the National Aeronautics and Space
Administration’s (NASA) reaction to them, including the additional cost and
cost risk assumed by NASA; cost and schedule experience under the prime
contract; and the status of and outlook for the program’s financial
reserves. You also asked us to identify actions taken by NASA to keep the
space station program’s funding within certain limits through the
completion of the station’s assembly.
Background
and its international partners—Japan, Canada, the European Space
Agency (ESA), and Russia—are building the ISS as a permanently orbiting
laboratory to conduct materials and life sciences research under nearly
weightless conditions. Each partner is providing station hardware and
crew members and is expected to share operating costs and use of the
station. The NASA Space Station Program Manager is responsible for the
cost, schedule, and technical performance of the total program. The
Boeing Corporation, the station’s prime contractor, is responsible for ISS
integration and assembly. As of June 30, 1997, the prime contractor
reported that over 200,000 pounds of its station hardware was being built
or had been completed. According to NASA, by the end of fiscal year 1998,
hardware for the first six flights will be at Kennedy Space Center for
launch processing.
NASA
In our July 1996 report and subsequent testimony,2 we noted that the cost
and schedule performance of the space station’s prime contractor had
deteriorated and that the station’s near-term funding included only limited
financial reserves.3 We also identified an emerging risk to the program: the
1
Space Station: Cost Control Difficulties Continue (GAO/NSIAD-96-135, July 17, 1996).
2
Space Station: Cost Control Difficulties Continue (GAO/T-NSIAD-96-210, July 24, 1996).
3
Financial reserves are used to fund unexpected contingencies, such as cost growth, schedule delays,
or changes in project objectives or scope.
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indications of problems in the Russian government’s ability to meet its
commitment to furnish a Service Module providing ISS power, control, and
habitation capability.
For several years, the space station program has been subject to a
$2.1 billion annual funding limitation and a $17.4 billion overall funding
limitation through the completion of assembly, which until recently had
been scheduled for June 2002. According to NASA, these funding
limitations, or caps, came out of the 1993 station redesign. Previous
redesigns had been largely financially driven and the caps were intended
to stabilize the design and ensure that it could be pursued. However, the
caps are not legislatively mandated, although references to them in
congressional proceedings and reports indicate that NASA was expected to
build the space station within these limits.4 When the caps were first
imposed, the program had about $3 billion in financial reserves.
In our July 1996 report, we concluded that, if program costs continued to
increase, threats to financial reserves worsened, and the Russian
government failed to meet its commitment in a timely manner, NASA would
either have to exceed its funding limitation or defer or rephase activities,
which could delay the space station’s schedule and would likely increase
its overall cost. In June 1997 testimony, we said that, if further cost and
schedule problems materialized, a congressional review of the program
would be needed to determine the future scope and cost level for a station
program that merits continued U.S. government support.5 Over the past
several months, NASA has acknowledged that the potential for cost growth
in the program has increased.
Results in Brief
In May 1997, NASA revised the space station assembly sequence and
schedule to accommodate delays in the production and delivery of the
Service Module. This revision occurred after more than a year of
speculation regarding Russia’s ability to fund its space station
manufacturing commitments. To help mitigate the adverse effects of the
Russian’s performance problems and address the possibility that such
problems would continue, NASA developed and began implementing
step 1 of a 3-step contingency plan. NASA has budgeted an additional
4
These limitations apply only to the station budget line providing funds to support development,
utilization, and operation activities. This budget line does not cover all station and station-related
requirements, including NASA personnel and personnel-related activities, space shuttle launch
support, and shuttle performance improvements needed to meet station requirements.
5
Space Station: Cost Control Problems Continue to Worsen (GAO/T-NSIAD-97-177, June 18, 1997).
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$300 million from other NASA activities for the space station program to
cover the hardware costs under step 1. NASA will also incur other costs
under step 1 that have not yet been estimated. Significant additional cost
growth could occur in the station program if NASA has to implement
steps 2 and 3 of its contingency plan.
The cost and schedule performance of the station’s prime contractor has
continued to steadily worsen. From April 1996 to July 1997, the contract’s
cost overrun quadrupled to $355 million, and the estimated cost to get the
contract back on schedule increased by more than 50 percent to
$135 million. So far, NASA and prime contractor efforts have not stopped or
significantly reversed the continuing deterioration. The station program’s
financial reserves have also significantly deteriorated, principally because
of program uncertainties and cost overruns. The near-term reserve posture
is in particular jeopardy, and the program may require additional funding
over and above the remaining reserves before the completion of station
assembly.
To date, NASA has taken a series of actions to keep the program from
exceeding its funding limitations and financial reserves. NASA is accounting
for these actions in ways that enable it to report its continuing compliance
with the funding limitations. However, to show continuing compliance in
some cases, NASA has had to redefine the portion of the program subject to
the funding limitations. Thus, the value of the current limitations as a
funding control mechanism is questionable.
Since our June 1997 testimony, further cost and schedule problems have
materialized and NASA has acknowledged that the potential for cost growth
in the program has increased. More complete estimates of the cost and
schedule impacts of ongoing and planned changes to the program are
scheduled to be available later this year. This information is expected to
provide a more complete and current picture of the cost and schedule
status of the program and clarify some of the major future cost risk it
faces. We believe the program has reached the point where the Congress
may wish to review the entire program. Such a review should focus on
obtaining congressional and administration agreement on the future scope
and cost level for a station program that merits continued U.S. government
support. In view of the expected availability of revised cost estimates, the
first opportunity for such a review would be in conjunction with NASA’s
fiscal year 1999 budget request.
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Russian Performance
Problems Cause
Additional NASA
Activity
As a partner, Russia committed to making a variety of contributions to the
ISS. These contributions include (1) the Service Module to provide crew
habitation during assembly; (2) the Science Power Platform to help
maintain the station’s orientation; (3) launch services to reboost and
resupply the station, including the provision of propellant; and (4) Soyuz
spacecraft to provide crew return capability during station assembly.6
In late 1995, NASA became concerned about Russia’s ability to provide
steady and adequate funding for its commitments. According to the NASA
Administrator and station program officials, the Russian government said
repeatedly that the problem would be resolved, despite mounting evidence
to the contrary. Finally, in the fall of 1996, Russia formally notified NASA
that funding difficulties would delay the completion of the Service Module,
which is a critical component for early assembly. Subsequently, NASA
designed a three-step recovery plan. Step 1 focuses on adjusting the
station schedule for an 8-month delay in the availability of the Service
Module and developing temporary essential capabilities for the station in
case the Service Module is further delayed by up to 1 year. Major activities
in this phase include delaying the launch of station components that are to
precede the Service Module into orbit and building an Interim Control
Module to temporarily replace the Service Module’s propulsion capability.
Step 1 is underway; the new or modified hardware being developed will be
completed even if Russia maintains the Service Module’s revised schedule
and delivers it on time. NASA officials told us that Russia has resumed its
financial commitment, the Service Module assembly has restarted, and
significant progress is being made.
Step 2 is NASA’s contingency plan for dealing with any additional delays or
the Russian government’s failure to eventually deliver the Service Module.
This phase could result in permanently replacing the Service Module’s
power, control, and habitation capabilities. NASA will decide later this fall
on whether to begin step 2. Under step 3 of NASA’s plan, the United States
and other international partners would have to pick up the remaining
responsibilities the Russian government would have had, such as station
resupply and reboost missions and crew rescue during assembly. A
decision on step 3 is planned for sometime next year, at the earliest.
In addition to their effects on space station development activities, these
recovery plan steps place additional requirements on the space shuttle
program. Under the plan, the space shuttle may be needed to launch and
6
Russia is also receiving funds under contract to build the U.S.-owned Functional Cargo Block to
provide the ISS’ initial guidance and navigational control capability.
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deliver the Interim Control Module and perform station resupply missions
now expected to be done by Russia. Although the full impact of the
recovery plan on the space shuttle program is not yet known, the plan has
already resulted in the addition of two shuttle flights during the station’s
assembly.
Prime Contractor’s
Cost and Schedule
Performance
Continues to
Deteriorate
The prime contractor’s cost and schedule performance on the space
station, which showed signs of deterioration last year, has continued to
decline virtually unabated. Since April 1996, the cost overrun has
quadrupled, and the schedule slippage has increased by more than
50 percent. Figure 1 shows the cost and schedule variances from
January 1995 to July 1997. Cost variances are the differences between
actual costs to complete specific work and the amounts budgeted for that
work. Schedule variances are the dollar values of the differences between
the budgeted cost of work planned and work completed. Cost and
schedule variances are not additive, but negative schedule variances can
become cost variances, since additional work, in the form of overtime, is
often required to get back on schedule.
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Figure 1: Cost and Schedule Variances
on the Space Station Prime Contract
(Jan. 1995 to July 1997)
Dollars in millions
100
0
-100
-200
-300
-400
Cost
Schedule
1/95 4/95 7/95 10/95 1/96 4/96 7/96 10/96 1/97 4/97 7/97
27 -16 -19 -48 -62 -89 -123 -163 -223 -291 -355
-43 -45 -46 -55 -77 -88 -105 -107 -118 -129 -135
Note: The zero line represents meeting planned cost and schedule. Negative schedule variances
are the estimated cost of work to get back on schedule.
Between January 1995 and July 1997, the prime contract moved from a
cost underrun of $27 million to a cost overrun of $355 million. During that
same period, the schedule slippage increased from a value of $43 million
to $135 million. So far, the prime contractor has not been able to stop or
significantly reverse the continuing decline.
In July 1996, independent estimates of the space station’s prime contract
cost overrun at completion ranged from $240 million to $372 million. Since
then, these estimates have steadily increased, and by July 1997 they ranged
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from $514 million to $610 million.7 According to program officials, some
financial reserves will be used to help cover the currently projected
overrun.
Delays in releasing engineering drawings, late delivery of parts, rework,
subcontractor problems, and mistakes have contributed to cost overruns.
NASA’s concern about performance problems under the prime contract is
evidenced by its recent incentive and award fee actions. In March 1997,
NASA directed Boeing to begin adjusting its biweekly incentive fee accruals
and billings based on a higher cost estimate at completion than Boeing
was officially reporting. On the basis of an internal review, Boeing
subsequently increased its estimate of cost overrun at completion from
$278 million to $600 million. The increase in Boeing’s estimate potentially
reduces its incentive award by about $48 million over the remainder of the
contract period.
Boeing was also eligible for an award fee of nearly $34 million for the
6-month period ending in March 1997. However, citing significant
problems in program planning, cost estimating, and hardware
manufacturing, NASA concluded that Boeing’s performance did not warrant
an award fee. NASA also directed Boeing to deduct almost $10 million from
its next bill to refund the provisional award fee already paid during the
period.8
Boeing is implementing a corrective action plan for each identified
weakness and has outlined a number of actions to improve the
performance of the entire contractor team, including changing personnel,
recruiting additional software engineers and managers, and committing
funds to construct a software integration test facility. Boeing also
presented a cost control strategy to NASA in July 1997. According to NASA
officials, the strategy includes organizational streamlining and transferring
some roles to NASA.
Station officials assessed Boeing’s efforts to improve its performance as
part of the midpoint review for the current evaluation period. They
7
Cost reports include internal and independent assessments of total program cost variance at
completion. Methodologies include statistical calculations and analyses using a software program
developed by the Department of Defense for analyzing contractor-reported cost data. Independent
estimates are developed by NASA and the Department of Defense’s Defense Contract Management
Command (DCMC).
8
Under the terms of the contract, Boeing could receive a previously denied award fee after NASA’s
final assessment at the end of the contract.
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concluded that, while there was some improvement, it was insufficient to
permit resumption of provisional award fee payments.
When NASA redesigned the space station in 1993 and brought Russia into
the program as a partner, the program had approximately $3 billion in
financial reserves to cover development contingencies. Since then, the
program reserves have been significantly depleted. In June 1997, the
financial reserves available to the program were down to about
$2.2 billion. NASA estimated that, by the end of fiscal year 1997, the
remaining uncommitted reserves could be less than $1 billion.
Financial Reserves
Are Dwindling
Financial reserves have been used to fund additional requirements,
overruns, and other authorized changes. By June 1997, a station program
analysis indicated that fiscal year 1997 reserves might not be sufficient to
cover all known threats. More recently, station officials have estimated
that a small reserve surplus is possible in fiscal year 1997, but concerns are
growing regarding the adequacy of fiscal year 1998 reserves.
has already identified threats to financial reserves in future years
that, if realized, would outstrip the remaining reserves. For example,
program reserves have been identified to cover additional cost overruns;
crew rescue vehicle acquisition; hardware costs, in the event that ongoing
negotiations with partners are unsuccessful; and additional authorized
technical changes. Thus, with up to 6 years remaining until on-orbit
assembly of the station is completed, NASA has already identified actual
and potential resource demands that exceed the station’s remaining
financial reserves. Unless these demands lessen and are not replaced by
other demands of equal or greater value, or NASA is able to find offsets and
efficiencies of sufficient value to replenish the program’s reserves, the
space station will require additional funding.
NASA
NASA Acts to Stay
Within Funding
Limitations and
Replenish Its
Financial Reserves
has been able to consistently report compliance with funding
limitations and avoid exceeding its financial reserves, despite significant
programmatic changes and impacts that have increased station costs. To
enable it to do so, NASA has implemented or initiated a variety of actions,
including those summarized below:
NASA
•
The space station program is negotiating with ESA, Canada, and Brazil to
provide station hardware. Under proposed offset arrangements, the ISS
partners—ESA and Canada—would build hardware associated with the
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•
•
•
•
U.S. commitment in return for launch services or other considerations.
Under a cooperative arrangement, Brazil would receive a small allocation
of the station’s research capacity in return for any U.S. equipment it would
agree to build. NASA estimates that $116 million in U.S. station development
costs could be saved through these arrangements. Space station officials
have scheduled a threat of $100 million against the program’s financial
reserves in case the negotiations are unsuccessful. However, according to
program officials, most of the negotiations are nearly completed.
NASA dropped the centrifuge from the station budget and opened
negotiations with the Japanese government to provide it.9 Also, the space
station’s content at the assembly completion milestone was revised to
exclude the centrifuge. This change enabled NASA to maintain the
then-current June 2002 assembly completion milestone, even though the
centrifuge and related equipment would not be put on the station until
after that date.
NASA transferred $462 million from its science funding to the space station
development funding in fiscal years 1996 through 1998. NASA has scheduled
the payback of $350 million—$112 million less than the amount
borrowed—through fiscal year 2002. NASA is also planning to transfer
another $70 million in fiscal year 1999.10 All of these funding transfers are
within the $17.4 billion funding limitation through assembly completion.
NASA transferred $200 million in fiscal year 1997 funding to the station
program from other NASA programs to cover costs incurred due to Russian
manufacturing delays.11 Congressional action is pending on the transfer of
another $100 million in fiscal year 1998. These funds will be accounted for
outside the portion of the program subject to the funding limitations.
NASA uses actual and planned reductions in its fiscal year funding
requirements to help restore and preserve its actual and prospective
financial reserves. Typically, these actions involve rephasing or deferring
activities to future fiscal years. For example, the agency’s current reserve
posture includes actions such as moving $20 million in spares
procurement from fiscal years 1997 to 1999 and $26 million in nonprime
efforts from fiscal year 1997 to various future fiscal years.12
9
The centrifuge is a crucial piece of research equipment for the space station. NASA recently listed a
threat against future years’ reserves in the event that the negotiation is unsuccessful. However, NASA
told us that an “agreement in principle” is expected soon.
10
NASA expects to make these funds available by employing a new approach to doing materials
research that will not initially require a facility-class level Furnace Facility.
11
The House and Senate Appropriations Committees concurred in the transfer of almost all of this
amount from the space shuttle program.
12
The nonprime part of the space station program involves a large number of relatively small contracts
for developing the ground-based and on-orbit capabilities to use and operate the space station.
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Additional Costs and
Cost Threats Are Not
Yet Estimated
The cost impact of the schedule delay associated with step 1 of the
Russian recovery plan is not yet fully understood. During congressional
testimony in June 1997, the NASA Administrator stated that NASA was
assessing the cost effects of a later assembly completion date. Any delay in
completing the space station assembly would increase the program’s costs
through the completion of assembly because some costs would continue
to accumulate over a longer period. When NASA redesigned the station in
1993, it estimated that Russia’s inclusion as a partner would reduce
program costs by $1.6 billion because the station’s assembly would be
completed by June 2002—15 months earlier than previously scheduled.13
NASA has recently acknowledged that the completion of the station’s
assembly will slip into 2003, but it has not yet scheduled the revised
assembly completion milestone. If the scope and capability of the program
under the June 2002 assembly completion milestone remain the same, the
new milestone date will be set for the latter part of 2003. Consequently,
most, if not all, of the reduced costs claimed by accelerating the schedule
would be lost.
estimated the additional hardware costs associated with step 1 of the
Russian recovery plan at $250 million. When the estimate was made, the
specific costs of many of the components of the plan were not known. For
example, NASA’s initial estimate includes $100 million for the Interim
Control Module, but NASA now estimates that the module will cost
$113 million.14 The total of $300 million in additional funding for the space
station program in fiscal years 1997 and 1998 includes financial reserves.
The most recent cost estimate for the Interim Control Module already
indicates threats to those reserves.
NASA
plans to use the extra time created by the schedule slip to perform
integration testing of early assembly flight hardware at the Kennedy Space
Center. As of June 1997, the cost of this testing had not been fully
estimated. However, NASA is currently budgeting $15 million in reserves for
the effort.
NASA
If NASA initiates further steps in the recovery plan, new or refined cost
estimates would be required. Step 2 provides for the development of a
permanent propulsion/reboost capability and modifications to the U.S.
13
For a discussion of the costs related to Russia’s inclusion in the ISS program as a partner, see Space
Station: Impact of the Expanded Russian Role on Funding and Research (GAO/NSIAD-94-220, June 21,
1994) and Space Station: Update on the Impact of the Expanded Russian Role (GAO/NSIAD-94-248,
July 29, 1994).
14
A further refinement of the cost estimate for the Interim Control Module is expected shortly.
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Laboratory to provide habitation. According to the NASA Administrator, the
effort under this step could be funded incrementally, thus limiting the
up-front commitment. NASA’s initial cost estimate for step 2 is $750 million.
Step 3 of the plan would result in the greatest overall cost impact on NASA
because it assumes that Russia would no longer be a partner and that NASA,
along with its remaining partners, would have to provide the services now
expected from Russia. For its share of the mission resupply role, NASA
would have to use the space shuttle or purchase those services from
Russia or others. In addition, the United States would have to purchase
Soyuz vehicles from Russia or accelerate the development of the
six-person permanent crew return vehicle. NASA has not officially
estimated the cost of step 3, but it clearly would be very expensive: the
potential cost of shuttle launches or purchased launch services alone over
the station’s 10-year operational life would be in the billions of dollars.
NASA expects to have more refined cost estimates for the contingency plan
later this year.
Conclusions and
Recommendation
Some of NASA’s actions to reinforce its financial reserves and keep the
program within its funding limitations have involved redefining the portion
of the program subject to the limitations. Such actions make the value of
the current limitations as a funding control mechanism questionable.
Therefore, we recommend that the NASA Administrator, with the
concurrence of the Office of Management and Budget, direct the space
station program to discontinue the use of the current funding limitations.
Matters for
Congressional
Consideration
More complete estimates of the cost and schedule impacts of ongoing and
planned changes to the program will be available later this year. This
information will help provide a more complete and current picture of the
cost and schedule status of the program and clarify some of the major
future cost risk it faces. After this information is available, the Congress
may wish to consider reviewing the program. This review could focus on
reaching agreement with the executive branch on the future scope and
cost level for a station program that merits continued U.S. government
support. In view of the expected availability of revised cost estimates, the
first opportunity for such a review would be in conjunction with NASA’s
fiscal year 1999 budget request.
At the end of the review, if the Congress decides to continue the space
station program, it may wish to consider, after consultation with NASA,
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reestablishing funding limitations that include firm criteria for measuring
compliance.
Agency Comments
and Our Evaluation
In commenting on a draft of this report, NASA said that the report was a
good representation of the program’s performance and remaining major
challenges, but NASA was concerned that the report did not provide
sufficient detail for the reader to appreciate the progress the space station
program has made or understand the factors that have influenced the
decisions already made and those that will be made in the future.
agreed with our recommendation. NASA said that it had consistently
taken the position that the flat funding cap, while a fiscal necessity, was
inconsistent with a normal funding curve for a developmental program.
NASA added that the flat funding profile resulted in the deferral of
substantial reserves to later years, instead of being available in the
program’s middle years.
NASA
said that the station’s financial reserves were not intended to cover
the unanticipated costs of the Russian contingency activities, but rather
were largely intended to protect against U.S. development uncertainty.
NASA
In response to NASA’s comments, we added more information to the report,
including information on the status of the program and the origin of the
funding caps. However, the question of what the station’s financial
reserves were largely intended to cover is not relevant to our assessment,
which focused on whether the funding cap was an effective cost control
mechanism. Moreover, the central theme of our report is that funding
requirements have been rising and additional funds may be needed. We do
not suggest what the source of those funds should be.
Scope and
Methodology
To obtain information for this report, we interviewed officials in the ISS
and space shuttle program offices at the Johnson Space Center, Houston,
Texas, and NASA Headquarters, Washington, D.C. We also interviewed
contractor and DCMC personnel in Huntsville, Alabama, and Houston. We
reviewed pertinent documents, including the prime contract between NASA
and Boeing, contractor performance measurement system reports, DCMC
surveillance reports, program reviews, international partner agreements,
independent assessment reports, and reports by NASA’s Office of Safety and
Mission Assurance.
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We performed our work from January to July 1997 in accordance with
generally accepted government auditing standards.
We are sending copies of this report to the NASA Administrator; the
Director, Office of Management and Budget; and appropriate
congressional committees. We will also make copies available to other
interested parties on request.
Please contact me at (202) 512-4841 if you or your staff have any questions
concerning this report. Major contributors to this report are Thomas
Schulz, Frank Degnan, John Gilchrist, and Fred Felder.
Allen Li
Associate Director, Defense
Acquisitions Issues
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Appendix I
Comments From the National Aeronautics
and Space Administration
See p. 12.
See comment 1.
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Appendix I
Comments From the National Aeronautics
and Space Administration
See p. 12.
See comment 1.
See p. 12.
See p. 12 and
comment 2.
See comment 3.
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Appendix I
Comments From the National Aeronautics
and Space Administration
See comment 1.
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Appendix I
Comments From the National Aeronautics
and Space Administration
Now on p. 5.
See comment 4.
Now on p. 6.
See comment 5.
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Appendix I
Comments From the National Aeronautics
and Space Administration
Now on p. 9,
para. 1.
See comment 1.
Now on p. 9,
para. 2.
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Appendix I
Comments From the National Aeronautics
and Space Administration
See comment 6.
See comment 1.
See comment 7.
Now on p. 9,
para. 3.
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Appendix I
Comments From the National Aeronautics
and Space Administration
See comment 1.
Now on p. 9,
para. 5.
Now on p. 11,
para. 5.
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Appendix I
Comments From the National Aeronautics
and Space Administration
The following are GAO’s comments on the National Aeronautics and Space
Administration’s (NASA) letter dated September 8, 1997.
GAO Comments
1. We have modified the report based on NASA’s comments.
2. The purpose and use of financial reserves is not the relevant issue. Our
focus was on whether or not funding caps could be effective cost control
mechanisms under circumstances where program content subject to the
controls can be flexibly defined. In the past, NASA claimed the benefits of
Russian participation on the program’s cost and schedule, but now that
Russian participation is having negative cost and schedule effects, NASA
argues that the additional funding needed should be accounted for outside
the portion of the program subject to the funding limitation. Doing so
dilutes the cost control ability of a funding limitation.
3. NASA’s claimed cost savings from including Russia as a partner was
based mainly on a 15-month acceleration of the station’s assembly
completion milestone. Our purpose was to point out that the delay in the
assembly completion date means that NASA will incur additional costs
during the station’s developmental period. Only the amount remains to be
determined. In this report, we do not evaluate any of the claimed benefits,
including cost reductions, of Russian participation in the program as a
partner.
4. NASA correctly points out that the negative schedule variance under the
prime contract is growing at a much slower rate than the negative cost
variance, as shown by the slope of the lines in figure 1.
5. Figure 1 in the report accurately reflects cost and schedule variance
changes and is directly relevant to supporting our point that NASA could
experience additional cost growth if the deteriorating trend was not
reversed or at least slowed because the final actual cost growth could
exceed expected cost growth. After we completed our fieldwork on this
assignment, the prime contractor reported that its estimate of the cost
overrun at completion had more than doubled, from $278 million to
$600 million.
6. NASA correctly notes that the centrifuge was not included in the
development program when it was initially capped at $17.4 billion.
However, NASA subsequently budgeted the centrifuge within the program
and scheduled it for launch before the June 2002 assembly completion
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Appendix I
Comments From the National Aeronautics
and Space Administration
milestone. The centrifuge was later removed from the budget and NASA
began negotiations with the Japanese to provide it. At that time, it was
rescheduled for launch after the June 2002 assembly completion date. The
centrifuge example helps to illustrate the leeway NASA has to change the
content of the station program within the current cap. Such leeway
undermines the cap’s value as a cost control mechanism.
7. We were asked to identify those methods NASA had used to stay within
its funding limitations, not to evaluate NASA’s use of
“no-exchange-of-funds” or “negotiated offset” arrangements.
(707239)
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GAO/NSIAD-97-213 Space Station
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